Any serious approach to climate protection is important and helps to limit global warming. However, we believe that offsetting alone is not enough. Nor is every approach to climate protection equally well suited to a decision maker.

Offsets involve promoting and financing projects outside an issuer’s business that lead to a reduction in emissions. One example is the construction of wind turbines and solar plants in countries whose electricity production is dominated by coal-fired power plants. Another example is the reforestation of large forest areas to store CO2 in biomass. Offset transactions are intended to “neutralize” own emissions that cannot be further reduced, at least on a global level. This could also succeed if truly new emission reduction projects were initiated. In fact, however, emissions from today are usually “compensated” with emission credits from projects that were completed ten or 15 years ago. In this case, therefore, no new sink is created that could capture the emitted climate-relevant gases, at least in terms of amount, but only redistributes the fruits of past investments.

The entry into force of the Paris Agreement in January 2021 marked a fundamental change in the global governance of greenhouse gas emissions: Each signatory country committed to its own reduction targets. This had a significant impact on the voluntary carbon market and related “classical” offset transactions. The critical issue is whether and how to avoid “double counting” of emission reductions – using the same emission reduction to voluntarily offset and meet a country’s target under the Paris Agreement.

Most offset transactions run the risk of claiming the same emission reduction more than once. Host countries of offset projects could simply scale back their own abatement activities accordingly, if they count project savings toward their Nationally Determined Contributions (NDCs) to climate change mitigation. In this case, despite the implementation of a successful emission reduction project, on balance no emissions would be reduced at the country level. This is precisely what cannot be ruled out at present and will be difficult to rule out conceptually in the future, despite the Glasgow resolutions. Even if governments were to contractually agree today to waive the crediting of climate protection projects to their own reduction measures, it would have to be ensured that this decision would still bind successor governments generations later. This means that reliably neutralizing one’s own carbon footprint through classic offset transactions, is hardly possible at present.

In the end, success lies in reducing, not offsetting. Classic offsetting transactions are associated with high transaction costs and high monitoring costs. Even with the highest possible transparency, the global net effect of offsetting is difficult to determine.